Segmenting Your Market
No business can be all things to all customers! Investors look to see that you have properly segmented your market.
What is a ServedAvailable Market (known as a SAM)? It is the portion of the TAM (Total Available Market) that your product or services can fill. For example, if you have a market TAM of $100B for all widgets but you makered widgets only, then you need to find out the portion of the overall TAM that is red widgets only.
In our simplistic example, the market segments would be red widgets, green widgets, purplewidgets - you get the idea.
The task is a bit more complex for real world products and services. If you are a marketer for a Business-to Business enterprise (B-to-B), then you want to classify thebusinesses you sell to by end product, size, market share, and geographic location. Examine each of these potential segments, and see which classification scheme makes sense. If your customers in Boston haveroughly the same needs as your customers in Shanghai, then a geographic segmentation is not a differentiator. A common segmentation for B-to-Bs is whether their end product serves the high, low, ormiddle end of the market price and quality-wise
You can also segment by business model. In the software world, you can segment by whether your end customer sells mostly to enterprises with multipleseats, over the Internet via downloads, or through retail distribution centers to consumers.
If your business serves John Q Public directly, then you can segment by demographics (age, affluence,geographic area), interests, occupation, etc.
There are many ways to segment, so it is best to brainstorm all the possibilities first, and then choose the categories that make the most sense.
For ourconstruction business, we segmented our market into Residential Remodels, Residential Additions, New Residential Construction, Public Works, and New Multifamily Construction.
After you have your...